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Canada's Health Plan Gives Employment Figures A Rosy Glow


Economic Trends

CANADA'S HEALTH PLAN GIVES EMPLOYMENT FIGURES A ROSY GLOW

In the fierce debate over how to reform the $1 trillion health industry, the idea of adopting a national health insurance plan along the lines of Canada's "single-payer" system has existed only on the fringes of policy discussions. The proposal recently got a surprising boost when the American College of Surgeons called for a single-payer system, arguing it would preserve freedom of patient choice and would be administratively simpler. Still, even support from a group of doctors won't convince policymakers who fear that the need to finance national health insurance would force companies to cut jobs.

Those worries, however, may be eased by a recent study of the job impact of national health insurance in Canada, which was phased in during the late 1960s and early 1970s. Economists Jonathan Gruber and Maria Hanratty of the National Bureau of Economic Research found that as NHI was adopted, employment increased by about 2%. Moreover, wages rose as well. Their research also suggests that the employment gains were permanent, rather than simply a short-run adjustment.

Why the positive labor-market impact? The two authors suggest the single-payer system raises labor productivity by improving the health of workers and increasing their job mobility. Higher labor productivity, in turn, makes companies more willing to hire workers.EDITED BY MICHAEL J. MANDEL Christopher Farrell in New York


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